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Portugal get more time on bailout goals

Friday, March 15 11:42:30

Portugal's creditors have eased its budget goals and granted it more time for deeply unpopular spending cuts under its bailout after the economy's outlook worsened further, Finance Minister Vitor Gaspar said today.

The international creditors said they expect gross domestic product to slump by 2.3 percent this year, much deeper than the 1 percent drop they forecast at the time of their last review in November - starkly illustrating the impact of successive waves of austerity on Portugal's already fragile economy.

Gaspar told a news conference the country had passed the seventh bailout review by inspectors from the 'troika' - the European Commission, IMF and European Central Bank - which would qualify it for the next tranche of rescue loans worth 2 billion euros. The review lasted about a week longer than previous ones.

"Europe still lives a period of crisis," Gaspar said. "We all know how this external setting affects the Portuguese economy."

Last month, the European Commission forecast Portugal's economy would shrink by 1.9 percent this year, mainly blaming Europe's recession.

Portugal's own recession is in its third year and is the country's worst since the 1970s - brought on by a fall in consumption and investment after the government imposed painful tax hikes and spending cuts under the 78-billion-euro bailout.

With resistance to further austerity within Portugal having gathered pace in recent weeks, the lenders granted an extra year for Lisbon to make permanent spending cuts worth 2.5 percent of GDP, or roughly 4 billion euros.